The One-Chart Summary Of All That Is Wrong With The US Financial System: JPM Deposits Over Loans

Tyler Durden's picture


The chart below may be the best one-chart summary of all that is wrong with the US financial system. It is a very simple chart - it shows total JPMorgan deposits, loans and the excess difference of deposits over loans.

Why is it a good summary? Because as the blue bar shows, total loans issued by the biggest US bank were $723 billion in Q1 2013: about $30 billion less than in the quarter Lehman blew up. Four years later, and the US commerical bank lending apparatus is still in a state of depression. Or so it would appear on the books.

But why doesn't JPM lend out more: after all that is the main pathway to stimulate the economy as all pundits will tell us. Simple: it doesn't need to. As the red bars show, total consumer deposits held by the bank just rose once more, this time to a record $1202.5 billion, up $9 billion in the quarter, pushing the deposit-over-loan difference to a new record $480 billion. This is happening exclusively due to the Fed, which when banks do not "create" money from loans (as they obviously don't), has to step in with QE and create money on its own.

It also means that JPM has to allocate this excess capital somehow and until a year ago, was simply funding its prop trading desk with this deposit cash as "dry powder" to manipulate and corner various derivative markets courtesy of the London Whale traders. Another result of course is that risk assets are bid up to record highs even as the actual flow through of the Fed's "wealth effect" is halted precisely due to the complete collapse in new loan creation - the primary "transmission mechanism" of economic growth.

In other words, by keeping the pedal to the metal on QE, the Fed is giving the banks all the benefits of money creation (soaring deposits), without any of the risks (loan creation in a record low Net Interest Margin environemnt). Any if you are JPM you will be perfectly happy with this arrangement and not seek to lend out any money, as the case has been for the past four years. Which means consumers who wish to take out loans to fund ventures and other growth strategies are fresh out of luck, because the banks that ordinarily supply them with this risk capital have simply shut down the process entirely.

And that is precisely the jist of all that is broken in the US financial system, and why the Fed is in fact making things worse, not better, and is progressively destroying the wealth of the middle class, stunting any growth opportunities the US may have, and all the residual wealth is pumped into the hands of those benefiting solely from rising asset prices.

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Fri, 04/12/2013 - 08:31 | 3440101 Jacque Itch
Jacque Itch's picture

I just took my morning Dimon and wiped my Bernanke

Fri, 04/12/2013 - 08:55 | 3440203 eclectic syncretist
eclectic syncretist's picture

Sounds like Bernanke is planting twolips under the table for Crimin' Dimon and LLoyd Blankheart

Fri, 04/12/2013 - 09:43 | 3440425 icanhasbailout
icanhasbailout's picture

who needs a functioning economy when you can make your fortune off free money?

Fri, 04/12/2013 - 10:29 | 3440657 walküre
walküre's picture

Brilliant, isn't it? And it works so well for the idiots at the top because the sheep aren't thinking outside the box and still accepting the funny money they print at face value.

Fri, 04/12/2013 - 10:49 | 3440767 Badabing
Badabing's picture

wow if the red was loaned out we would see double digit inflation

Fri, 04/12/2013 - 11:09 | 3440957 eatthebanksters
eatthebanksters's picture

So Main Street is doublefucked - once by Helicopter Ben and then again by banks....hmmm...what to do?

Fri, 04/12/2013 - 11:12 | 3440970 Seer
Seer's picture

".hmmm...what to do?"

Obviously it's to do MOAR! </sarc>

Fri, 04/12/2013 - 16:30 | 3442658 sasebo
sasebo's picture

Snafu --------

Fri, 04/12/2013 - 16:29 | 3442660 sasebo
sasebo's picture

When in doubt, whip it out.

You & i and a lot of others are working on this  --- so hopefully before long  ---------- we can't be that stupid.

Fri, 04/12/2013 - 11:01 | 3440873 Ludwig Van
Ludwig Van's picture

It is easy, when lost or distracted by the minutia, to forget that the object of these machinations is to kill the U.S. Dollar.

The boys are on record: To kill the USD.

With that understanding, it is clear they're doing an excellent job of it.

Prepare accordingly.


Fri, 04/12/2013 - 11:22 | 3441038 Seer
Seer's picture

In essence I completely agree with you on this.  However...

I see it more as a "recall" of the USD.  I also see it as just plain taking over a massively illusionary economy, an economy that has been so distorted for so long that there's really no way to clean it out other than slowly remove all the players except the Big Boys who cooperate (with the Big Unwinding).

That anyone could not see the impending reality of a MAJOR restructuring in all that is civilization is beyond me.  The growth meme has been fun, but no longer can we organize ourselves on it.  The Bible mentions the Apocalypse- I'm no bible thumper, but I believe that the concept applies, and that's that there will be a big event, a big unveiling occurring- we'll all be stood up to the mirror and told to tell ourselves that no longer will growth be possible (a recall on "go forth and multiply"- the multiplier is popping up as a zero).

Fri, 04/12/2013 - 09:54 | 3440454 DaveyJones
DaveyJones's picture

excellent and simple truth Tyler


Fri, 04/12/2013 - 11:17 | 3441012 Strut
Strut's picture

Let’s see that chart with the % of loans that are government backed mortgages. JPM is almost the sole buyer of FHA, HUD, and USDA gov backed loans. I bet you'd see that the % of non govt secured loans are plummeting. They aren't taking on any risk except for their trading desk.

Fri, 04/12/2013 - 10:25 | 3440638 GoldForCash
GoldForCash's picture

Do you ever wonder just what the hell anyone or corp could do with 480 billion dollars? buy a country? Is it just a game to the assholes? I'm serious , not just ranting .

Fri, 04/12/2013 - 11:29 | 3441094 Seer
Seer's picture

Fine, and Then what?

Seems history is pretty clear when there's too great of a wealth divide.

It's been a Big Game for a Long time: perpetual growth on a finite planet.  Whether they knew that there was actually an end or not I do not know; BUT, I DO know that their positions of power will fade fast once the meltdown starts in earnest.

Fri, 04/12/2013 - 10:29 | 3440666 Saint Pitbull
Saint Pitbull's picture

The BIG problem now is that all of the QE's are waiting to explode into inflation if and when the banks do start lending.  This will become a bigger problem than the bank's not lending.  Solution (in the government's mind) - the government needs to seize the money that it cranked out in the QE's.  There is NO good exit from this economic treason.

Fri, 04/12/2013 - 10:49 | 3440774 Next to Arch Stanton
Next to Arch Stanton's picture

"if and when the banks start lending.."

Can inflation take off without the banks resuming "normal" levels of lending?  If they're not lending now, how does the macro environment possibly improve with all the systemic problems facing us to the point where banks want to resume "normal" lending?  

I've seen this narrative in many posts, articles, etc.  I suppose that lending is the only means by which the excess reserves can circulate in the broader economy (as opposed to stock market?).  

Fri, 04/12/2013 - 11:42 | 3441162 Seer
Seer's picture

"If they're not lending now, how does the macro environment possibly improve with all the systemic problems facing us to the point where banks want to resume "normal" lending?"

In essence govts are injecting banks with money as a pay-off to keep interest rates low.  The dance that they're dancing is alienating everyone else.

It's like the airplane pilot of an airplane that's lost all power who pulls the jet from a nose dive, and while the corrected descent keeps the plane from trying to bisect the ground, is now staring straight into the side of a mountain.  "Inflation," "deflation," when the end result is the same does it really matter?

Fri, 04/12/2013 - 11:56 | 3441239 CheapBastard
CheapBastard's picture

Wait until JPM decides to Corzine those deposits....moar pain cometh.

Fri, 04/12/2013 - 14:50 | 3442158 Ned Zeppelin
Ned Zeppelin's picture

Any visible chunks of half- digested Krugman in that fat Dimon?

Fri, 04/12/2013 - 08:31 | 3440105 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Tyler, we are all waiting with bated breath for an update on Lloyd's and Jamie's meeting with our compromiser-in-chief.  What's the good word?

Fri, 04/12/2013 - 10:26 | 3440636 SubjectivObject
SubjectivObject's picture

Hammer the commodity complex.

Free lunch at 11, go home at 1.  Laugh all the way.

Fri, 04/12/2013 - 08:33 | 3440112 firstdivision
firstdivision's picture

That means they have more money to make bets with.  Seems reasonable to me.

Fri, 04/12/2013 - 08:37 | 3440126 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Perhaps, after having read the article, the answer to the question is; QE to infinity and beyond, as we have expected all along? I don't believe the compromiser-in-chief would have a problem with that.

Fri, 04/12/2013 - 08:34 | 3440115 Bearwagon
Bearwagon's picture

Thar she blows!

Fri, 04/12/2013 - 08:37 | 3440118 yrbmegr
yrbmegr's picture

If people have all this money to deposit in the bank, why do they need loans?

Fri, 04/12/2013 - 08:42 | 3440148 LawsofPhysics
LawsofPhysics's picture

It's not depositors money, it "ZIRP" money.  Who do you think does the actual dirty work for the Fed?  JPM isn't just another primary dealer, it's the primary dealer.

Fri, 04/12/2013 - 08:47 | 3440171 yrbmegr
yrbmegr's picture

The article says it's "consumer deposits". I didn't think that included proceeds of asset sales. I think you're actually right that it's not just "consumer deposits".

Fri, 04/12/2013 - 08:57 | 3440196 LawsofPhysics
LawsofPhysics's picture

You are not very familiar with how "mark to fantasy" accounting or modern banking works are you?  Define "customer".  Go ahead, really, go see who is the "customer"  I think you will be surprised as to the customer really is.

Fri, 04/12/2013 - 09:00 | 3440227 eclectic syncretist
eclectic syncretist's picture

Please allow me to take a shot at interpreting what Tyler is telling you here, in layman's terms.

The Fed is printing (counterfeiting) money and giving it to the banks, so naturally, the banks have lots of profits.

It's really that simple.  And that wrong.  Morally, ethically, politically, culturally, legally, ect.  They should all be in jail.

Fri, 04/12/2013 - 09:04 | 3440244 LawsofPhysics
LawsofPhysics's picture

Glad to see someone understands what I am saying.  This money and these "customers" are proxie for the Fed, nothing more.  JPM has not been a real bank for over 50 years.

Fri, 04/12/2013 - 09:11 | 3440274 jayman21
jayman21's picture

I would up you 50 years and say at least 100 years.

Fri, 04/12/2013 - 09:13 | 3440292 eclectic syncretist
eclectic syncretist's picture

It's become a maelstrom circle-jerk.  The Fed gives it to the banks, who loan it to the government/taxpayers, who authorize the Fed to give more to the banks, who loan it to the government/taxpayers, ect.

The end result is the Fed is providing lots of imaginary value and we the taxpayers pay true value for it.  They should all be in jail.

Fri, 04/12/2013 - 10:46 | 3440701 centerline
centerline's picture

Bingo.  It is a wealth transfer mechanism.  Those who are closest to the creation of money benefit most.  Over time the disparity becomes obvious.

The trick here is just like in the movie "Trading Places."  It is not necessary to conduct outright theft per se.  It is about riskless trades/investments.  Which is still theft... but not in the eyes of the courts of course.

This is what asshat economists ignore.

Fri, 04/12/2013 - 10:36 | 3440706 walküre
walküre's picture

Same as the ECB does now. All sovereigns are basically living on their own fumes. It's like breathing farts and nothing else.

Fri, 04/12/2013 - 10:56 | 3440807 Kirk2NCC1701
Kirk2NCC1701's picture

It only LOOKS like a circle jerk. Actually, it's a Grand Plan to use tertiary (paper) wealth as a mechanism to transfer Real (primary) wealth to the Elite.

You will soon meet your (new & old) feudal Over-Lords. Who run this country. And their kind that is taking over other countries. By the time ppl realize this, it'll be too late.

Fri, 04/12/2013 - 11:50 | 3441197 Seer
Seer's picture

Um... they took over countries a LONG time ago.  What we're all seeing is that they are LOSING this grip, and that their thrashings make it sound as though they are trying to "save" everyone else.

STABILITY- that's what works best for TPTB.  When you plot out this course its trajectory leads to nothing of the sort (short-term it might look so, and perhaps to them even [I have no way of knowing what's in Their heads, though I tend to believe that they realize that they're at the helm of a sinking ship that's sailing in shark-infested waters]).

Fri, 04/12/2013 - 10:08 | 3440519 DaveyJones
DaveyJones's picture

Can somebody swat the down vote mosquito. Making me itch

Fri, 04/12/2013 - 10:30 | 3440661 SubjectivObject
SubjectivObject's picture

I love the smell of rejection in the morning. 

Smells like ..... victory.

Fri, 04/12/2013 - 09:36 | 3440377 scatterbrains
scatterbrains's picture

maybe they need all that extra money against their precious metals short book.  Could you imagine if real physical really did break from paper and the only way JPM could survive is for the fed to keep printing money to cover JPM's short bet which then drives gold higher requiring more printed money, pushing gold even higher, more and more, higher and higher in a feed back loop that can't be stopped ?

Fri, 04/12/2013 - 10:23 | 3440500 DaveyJones
DaveyJones's picture

this criminal law boy can't see it any other way. But (as William Black and others say) there's an earlier chapter. The Fed is doing this to cover, in part, prior criminal activity at a scale probably never seen before. Well, except for this "remedy" ...but that was after

you know, it makes me think this place just might be corrupt 


Fri, 04/12/2013 - 12:02 | 3441282 Seer
Seer's picture

The System was flawed from the get-go.  Perpetual growth on a finite planet was always going to turn out badly.  All these folks are operators of this System.

Is there a Captain Kirk out there?  In one episode of Star Trek there was a flashback to him in training school engaged in a test that was rigged for failure.  Kirk "won" by reaching outside the parameters of the rigged test- in essence "cheating."  He claimed that the aim was to succeed, and in this case, since it was all (unfairly) stacked against him he was well within reason to do what he did (he was, after all, responsible for his crew).

One could say that the likes of Dimon have operated as Kirk, but I'd claim that he (Dimon and the others) have acted just as the rigged system intended.

Buckminster Fuller said that you cannot change the system, and you should, instead, look to create something else and make the current/old obsolete.

Fri, 04/12/2013 - 10:01 | 3440502 KickIce
KickIce's picture

Deposit = Bonus + Commodity Purchases + Bond Purchases + Stock Purchase

Everything one needs to keep the ponzi illusion alive and kicking.

Where's Krugman's sorry ass claiming they need more.

Fri, 04/12/2013 - 08:54 | 3440186 dontgoforit
dontgoforit's picture

The banks' make money on the interest from the loans they make.  It's not in their interest to just 'hold' the funds.

Fri, 04/12/2013 - 09:01 | 3440233 fonzannoon
fonzannoon's picture

ask the london whale if he was "holding" the funds.

Fri, 04/12/2013 - 10:02 | 3440499 Cacete de Ouro
Cacete de Ouro's picture

Matt Zames, JP Morgan CIO:

“I wake up every morning -- every morning -- excited to actually make this place a better place. I am truly humbled and honored to have been given the opportunity.”

Fri, 04/12/2013 - 10:41 | 3440728 Againstthelie
Againstthelie's picture

Zames? A chosen one? Understandably when doing the work of god...


Fri, 04/12/2013 - 09:31 | 3440235 LawsofPhysics
LawsofPhysics's picture

If in fact banks were really banks and had to manage that risk or actually go bankrupt, what you say would be true.  I agree, if it were you or I, what you would say would be true.  However, if those "customers" are really proxie for another entity that stands to benefit from not making loans or not paying the saver interest, well then, the bank really isn't a bank now is it?  JPM hasn't been a bank for over 50 years.

Fri, 04/12/2013 - 10:14 | 3440544 DaveyJones
DaveyJones's picture

if in fact our leaders were really leaders...

if in fact our prosecutors were really prosecutors

if in fact our protection agencies were really - well you get the point

(so just as my screen refreshed it already had the negative vote. Good Morning Ben)

Fri, 04/12/2013 - 09:08 | 3440257 eclectic syncretist
eclectic syncretist's picture

No, the banks are making money now because every month the Fed gives them $85 billion brand new imagineered dollars.

As shitty as the yield on the ten-year bond is, you figure 2% of $85B/month is $1.7B/month or over $20B/year, if they just plow it all into government debt.  The banks might not actually make that much for a variety of reasons, but that is a very fair cocktail napkin type estimate of the value being provided to them.  Now when you factor in fraction reserve leveraging, which amps everything up by can begin to see there is little reason to lend to anyone other than the Gov. = no loans for main street.

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